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1. Introduction: the Essentials of Valid Contract

1. Introduction: the Essentials of Valid Contract. B ackground reading: Chapter Two and Three in Commercial Law in New Zealand. NB this contains more detail than is required but will give you a good sense of the subject area. Question for reflection.

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1. Introduction: the Essentials of Valid Contract

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  1. 1. Introduction: the Essentials of Valid Contract Background reading: Chapter Two and Three in Commercial Law in New Zealand. NB this contains more detail than is required but will give you a good sense of the subject area.

  2. Question for reflection • In what sort of situations do businesses or other entities make use of contracts? • Consider • a restaurant chain? • a fashion designer/retailer? • a government department?

  3. What is a Contract? • An agreement between parties which the law will enforce. • Per Lord Stowell ‘... [contracts] must not be the sport of an idle hour, mere matters of pleasantry, never intended by the parties to have any serious effect whatever’.

  4. What is a Contract? • The intention of the parties is at the heart of a contract. • Intention is determined objectively. • NB. While the parties intentions are at the heart of the contract, the contract will not consist solely of the terms the parties intend. • Other terms may be implied into the contract by the external legal framework. • The external legal framework may also limit contractual freedom in some circumstances.

  5. Tools for Determining Intention • Offer • Must be capable of immediate acceptance and indicate an intention to be bound. • Must be distinguished from an “invitation to treat”eg • Goods displayed in a shop window. • The contract is made when the offer is accepted at point of payment • Pharmaceutical Company of Great Britain v Boots Cash Chemists • Most (but not all!) advertisements in newspapers or elsewhere

  6. Tools for Determining Intention • Acceptance • Must be final and distinguished from a counter-offer • Must be communicated • Although note the postal acceptance rule is one narrow exception to this

  7. The law requires some outward sign of the offeree’s acceptance of the offer. Acceptance may be: • express (either written or oral), or • by conduct.

  8. Acceptance by conduct is quite common. The purchase of a bar of chocolate from a vending machine would be an example. In such a case consider: • Who makes the offer? • What constitutes acceptance? • What if the machine is empty?

  9. Tools for Determining Intention“the Global Approach” • Where circumstances point strongly enough to an agreement the court is entitled to recognise it even though it cannot identify a specific offer or acceptance. • Boulder Consolidated Ltd v Tangaere[1980]1 NZLR 560

  10. Revision- “Battle of the forms”Is this an enforceable contract? • Company X want to buy some stationery from Company Y. They email their order on their standard purchase form which contains a number of terms and conditions. • Company Y email back saying “we accept your offer. Please see attached standard shipping voucher for terms and conditions ”

  11. Intention to Create Legal Relations • If the law is to enforce an agreement the parties must have intended their agreement to be legally enforceable. • Intention is determined objectively on a fact based investigation • Flemming v Beevers[1994]1 NZLR 1047.

  12. Intention to Create Legal Relations • Distinction between social and domestic arrangements • Balfour v Balfour [1919]2 KB 571 • And commercial dealings • Esso Petroleum v Customs & Excise [1976]1 WLR 1 • Modern New Zealand approach is to carefully examine the facts to determine whether the parties had formed an intention to enter into a legally binding agreement.

  13. Revision-Is this an enforceable contract? • A, a full time student, agrees to work in her father’s shop on Saturdays for $100 a week. After 3 weeks he has still not paid her.

  14. Consideration • At common law a promise must be paid for to be enforceable. • Consideration may take the form of a: • Benefit to the promisor • Detriment to the promissee incurred at the promisor’s request • Consideration must be of value but the law is unconcerned with how adequate this is (“the peppercorn” principle.)

  15. Consideration • Williams v Roffey Brothers [1990]1 All ER 512 has reduced the importance of consideration • Per Russell LJ “a rigid approach to the concept of consideration [is not] necessary or desirable…courts should be ready to find its existence so as to reflect the intention of the parties.”

  16. Revision-Is this an enforceable contract against A? Is there consideration? • A, a tv personality agrees to speak at a fund raising function for a charity. The day before he tells the charity he has decided to go to a party instead. As a result, many of those who would have attended do not and the charity does not raise as much as it had hoped.

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